india going global.indd - The IIPM Think Tank

MERGERS & ACQUISITIONS
Foreign Exchange Regulation Act, 1973 (FERA) have been
substantially removed.
In 1994, the law relating to acquisition of shares of quoted/listed
companies was codified and the Securities and
Exchange Board of India (SEBI) announced the Substantial
Acquisition of Shares and Take over Code (the ‘code’). The
code inter alia provides that if any one or more persons
together acquire 10 per cent or more equity shares of a listed
company, the acquirer shall make an offer to the remaining
shareholders of the company to acquire their shares. Indian
Companies Act, 1956: This has provisions specifically dealing
with the amalgamation of a company or certain other
entities with similar status. The most common form of
merger involves an elaborate but time-bound procedure
under sections 391 to 394 of the Act. An amalgamation is
complete only after the court sanctions it and it takes effect
after the order of the court is filed with the Registrar of
Companies TOP.
Latest take over code of SEBI:
For ensuring smooth takeovers,
SEBI has designed the framework
for listed companies from the taken
over target companies, which is
defined and detailed: Takeover is
when “acquirer” takes the control
by acquiring “substantial quantity of
shares or voting rights” of the Target Company (where Target
company: A Target company is a listed company whose
shares are listed on any stock exchange and whose shares or
voting rights are acquired/ being acquired or whose control
is taken over/being taken over by an acquirer.)
Acquirer: An Acquirer includes persons acting in concert
(PAC) with the same i.e. any individual/company/any other
legal entity which intends to acquire or acquires substantial
quantity of shares or voting rights of target company
or acquires or agrees to acquire control over the target
company.
Control:
Control is the right to appoint either directly or indirectly or
by virtue of agreements or in any other manner majority of
directors on the Board of the target company or to control
management or policy decisions affecting the target company.
However, in case there are two or more persons in
control over the target company then in that case of any one
of the persons from such control shall neither be deemed
to be in control of management nor to any change in the
nature and quantum of control amongst them.
The restrictions on
M&A transactions
in India have been
substantially relaxed
with the liberalisation
of the economy
been registered with SEBI before making a PA. PA is required
to be made through the said MB. The acquirer is
required to make the P.A within 4 working days of entering
into an agreement to acquire shares or to decide how to
acquire shares/ voting rights of Target Company or after
any such change or changes that would result in change in
control over the target company.
In case of indirect acquisition or change in control, the
PA is made by the acquirer within 3 months of consummation
of such acquisition or change in control or restructuring
of the parent company or control over the target
company. The offer price in these cases is determined with
reference to the date of the public announcement for the
parent company and the date of the public announcement
for acquisition of shares of the target company, whichever
is higher, in accordance with the parameters mentioned in
the Takeover Regulations Documentation which is a copy
(hard and soft) of the PA and which
is required to be submitted to SEBI
simultaneously with the publication
of the same in the newspapers.
A draft letter of offer is required
to be filed with SEBI within 14 days
from the date of Public Announcement
along with a filing fee of
Rs.50,000/- per letter of offer (payable
by Banker’s Cheque / Demand
Draft). A due diligence certificate along with registration
details as per SEBI circular no. RMB (G-1) series dated
June 26, 1997 is also required to be filed together with the
draft letter of offer.
Letter of offer:
The MB will incorporate in the letter of offer the comments
made by SEBI and send it within 45 days from the
date of PA the letter of offers along with the blank acceptance
form, to all the shareholders whose names appear
in the register of the company on the Specified Date. The
offer remains open for 30 days. The shareholders send
their Share certificate(s) / related documents to registrar or
Merchant banker as specified in the PA and letter of offer.
The pays consider all those shareholders whose shares are
accepted under the offer, within 30 days from the closure
of offer.
The offer once made cannot be withdrawn except in the
under mentioned circumstances:
Statutory approval(s) required have been refused;
The sole acquirer has died a natural death;
Circumstances wherein the board orders a withdrawal.
Public announcements:
The Acquirer appoints a Merchant Banker (MB) who has
Safeguards incorporated in the takeover:
The acquirer has to open an escrow account before making
July-October - 2007 Need the Dough
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